Although a couple of decades ago no bank would choose Singapore for their affiliation, since then the situation has changed truly drastically. Now it is the place that comes to the top of one’s mind: Singapore has become a thriving center for international banking. Momentarily, it soon-to-become one amongst the most powerful and sophisticated centers on the worldwide banking scene.
Let’s explore what made Singapore’s progress so tremendously successful. Firstly, the environment of the financial and banking sector in Singapore is so well-created, it is an incredibly attractive location to open a virtual bank or a financial institution. The combination of factors creating this overwhelmingly positive reputation include the quality of sound regulation, supervision in financial and banking sectors, favorable tax policy, active efforts for fighting financial criminality as terrorist financing and money laundering. In addition to the previous fact, Singapore is becoming an enormous fintech hub in Asia and outside of it.
In case you are preparing to increase your business coverage all the way to Singapore, this article will be helpful since we are about to discuss banking regulation in Singapore.
Who is in control of the system?
Before launching a financial business in Singapore, the institution needs to be authorized and regulated according to the Monetary Authority of Singapore (MAS). Besides other functions, MAS supervises banking activity and disposes complete functions of Central Bank of Singapore.
Earlier, new banking institutions were registered in Singapore in accordance with the MAS Law. However, for the ones planning to start their banking in Singapore from October 1 of 2020, the licensing scheme is different – they will be authorized with the Banking Act (BA).
Banking license in the digital format
Seeking the goal of catching-up with Western countries, Singapore and Asia in general are putting an emphasis on developing the quality of digital services. The virtual banking is improving quickly as well.
As a part of this initiative there are two types of licenses presented by Singapore: the first one is a full coverage banking license and the second one is an exclusive license for working with corporate clients only. A full digital banking license can only be given to the institutions whose head office is in Singapore and the company operates there. The release of two licenses of the first kind and three of the second kind was announced by MAS the current year.
What to start in Singapore: a branch or a subsidiary?
It is more common for foreign banks to open a branch in Singapore due to the lower capital costs in comparing to registering a subsidiary. However, both options are equally eligible for obtaining a banking license.
It is worth noticing, that in the case when a foreign bank has a substantial retail presence in Singapore while operating their branch there, it may be required from the bank to execute its retail activities via local legal entity from Singapore.
When it comes to the requirements the bank has to comply with, the legal consultants in COREDO will provide you with more detailed information on the financial activities’ regulation in Singapore.
Generally speaking, the requirements vary depending on the origin of the bank: whether it is Singaporean or coming from a foreign country.
What is prohibited and restricted?
- While being popularized as a haven for financial institutions, Singapore still has multiple operations that are not allowed to be processes or are restricted. These should be avoided:
- Operations that were not approved by MAS (existing exceptions should be inspected separately);
- Operations involving property development (financial institutions are not allowed to deal with immovable properties);
- Exceeding permitted 35 % of eligible assets by property exposure of banks.
As it takes proper monitoring of each bank registered in Singapore and its financial situation, MAS exercises its authorial power and initiates a legal proceeding in cases of possible bank insolvencies.
If the bank shows the signs of insolvency, the regulator can take over the problematic bank’s operating or announce a transitory administration. In the worst case scenario, the bank comes to the insolvency and is supposed to undergo the liquidation process. The procedure would be led according to the Companies Act (CA).
CA requires from foreign banks in liquidation to sell their assets in Singapore and fulfill all their commitments to Singapore. Not only CA defines how the assets are supposed to be sold, but also the sale’s principles and criteria. The criteria are utilized while preparing the sales plans, individual proposes and property pools of the bankrupt bank. Only in the case when the bank’s assets or property are included in the liquidation mass, they can be sold.
Receive a consultation from lawyers in COREDO
Our specialists will inform you about these topics in relation to Singapore banking sector:
- Singapore banking laws
- Registration of a banking institution in Asia
- Gaining a Singaporean banking license.